Investment Banker: What They Are & Why You Should Use One
Just like real estate brokers, investment bankers (IBs) bring buyers to sellers. IBs typically work on commission-based fee structure, incentivizing them to see the sale through to completion. They’re an invaluable tool to owners contemplating a sale. Here’s what you need to know about selecting the right investment banker for your needs.
Understanding Investment Bankers
Most buyers who hire investment bankers never purchase a business, so advisors may be hesitant to work with new clients. The key is to demonstrate commitment. If you change your mind, you need to let the advisor know immediately. It’s equally important to give the investment banker feedback if you feel they are not adequately addressing your needs.
It’s important to note that the wrong investment banker can do significantly more harm than good. They waste time, send you looking for the wrong businesses, and may even try to work both parties. IBs who represent both sides may have conflicts of interest that make them less honest. This is why it’s important to have an investment banker looking out for you, and to work diligently to control the negotiation process.
How an Investment Banker Can Help
Investment Bankers offer you listings and details on businesses that are available, including those you might not discover on your own. They can also help the negotiation process along by communicating with the seller and playing the role of “bad cop.” This helps you keep the relationship intact, and prevents stress as you move toward closing.
Where to Find an Investment Banker and How to Hire One
Before hiring an investment banker, meet with the owner or partner of the firm. Talk openly about your goals and experience, and ask them to suggest an advisor who will be a good fit. Then contact the investment banker on your own to set up a meeting. Trust your gut, and agree only to hire someone you trust.
It’s also helpful to ask lawyers, friends, family, business associates, and accountants for recommendations. They know the business, and can give you feedback on your candidates, as well as potential candidates to add to the pool of consideration
Ask for and check references. Be sure to ask each reference if they would hire the investment banker again. The more details you seek, the better, since a reference will give more information—including negative information—in response to specific questions.
By Scott Bushkie
With more than 20 years in the Mergers and Acquisitions (M&A) industry, Scott is a recognized leader in the field, providing exit strategies, business valuations, and M&A advisory services to business owners in the lower middle market. He has successfully executed sales to domestic and international buyers, private equity firms, family offices, and strategic buyers. Follow DealCoach on Linkedin
DealCoach is headquartered in Green Bay Wisconsin with an office in Milwaukee Wisconsin and helps customers find out how much their business is worth with online business valuations and advisory services. Our business valuations also known as an Estimate of Value (EOV), help prepare buyers and sellers for the sale. DealCoach also helps business owners grow value with a Business and Market Analysis and plan for retirement, estate & financial planning, benchmarking, and strategic planning. DealCoach servers and has provided business valuations for businesses located in the United States and Canada.
We are here to tell you what you need to hear in order to make a well-informed decision with most likely the largest financial transaction of your life. Our team has over two decades of M&A experience, and we have been completing Estimates of Value for our clients for over nine years.